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The Indian Textile Journal - May 2008 Viewpoint
Scale Up Capacity

Recently, there was a highly informative lecture on polyester scenario by a leading American fibre and intermediate manufacturer. He succintly answered the question “Why is Chinese polyester so strong?” Integration and sheer scale – to an extent, Chinese polyester industry has achieved good integration from polymerisation to DTY. Approximately, 75% of polyester is continuous polymerisation and not batch. They also have used little branding to influence downstream choice. This has helped the Chinese industry reach a highly competitive position in pricing at DTY and finished product level. Besides, the Chinese scenario showed positive signs in quality, reliability and logistics. In new loom shipments between 1997 and 2006, China received 57% of shuttle looms and 85% of shuttleless looms, according to the International Textile Manufacturers Federation (ITMF). 

Now there is a downside in the Chinese world – the costs have started rising, blunting its competitive edge in the global market. It is not prepared to take long-term export orders following appreciation of RMB. Export rebates are slowly being phased out in China. This has raised the cost of manufacturing goods by 14% to 17% at factory level. Chinese labour might be cheap, but not cheap unreasonably any more, say sources. Tougher labour laws and environmental pressures are adding new woes to the functioning of industry. Says the American Chamber of Commerce in Shanghai: "More than half of foreign manufacturers in China believe the mainland is losing its competitive advantage over countries like Vietnam and India.” Two major problems with India are low capacity and failure to stimulate the domestic demand. In polyester, China's capacity is forecast to be at 64% of global capacity by 2010, while India's is expected to be a meagre 9.5% of total. However China's overall growth is likely to slacken. The rapidly developing economies like Vietnam, Sri Lanka and Bangladesh are too eager to fill the gaps in the market that China will be leaving in the wake of this slowdown. Will India respond to this wake-up call? Quality, reliability and infrastructure apart, much will also depend on building more capacities.s.

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